Union offers to swap time-limited cost hike for new USS valuation

As more strikes loom, UCU believes fresh assessment of pension fund would show employers’ justification for cuts has ‘evaporated’

January 26, 2022
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The UK’s main higher education union has said that it would be prepared to accept a time-limited increase in employee contributions to the biggest sector pension fund if this allowed for a new valuation to be conducted.

The University and College Union claimed that its proposal offered a “way out” of strike action next month on dozens of campuses over cuts to Universities Superannuation Scheme (USS) benefits, following a three-day walkout last month.

Under reforms put forward by vice-chancellors, employer and staff contributions to the USS would remain unchanged – at 21.1 per cent and 9.6 per cent of salary, respectively – but pension payments would be reduced to close a multibillion-pound deficit. The UCU estimates that the cut to members’ guaranteed benefits could be as high as 35 per cent, equivalent to thousands of pounds a year in retirement, but Universities UK’s figures suggest that the reduction is between 10 per cent and 18 per cent.

The UCU argues that the size of the fund’s deficit is overestimated because the last USS valuation was conducted in March 2020, as the coronavirus pandemic hit and markets crashed. The scheme’s assets are believed to be worth billions more today, and the UCU said on that basis the “employers’ justification for the cuts has now evaporated”.

In the fresh proposals tabled on 26 January, the UCU said that it would be prepared to support an increase in member contributions to 11 per cent of salary from April 2022, with a further increase to 11.8 per cent from October, if that allowed for a “moderately prudent, evidence-based valuation” of the USS scheme as at the end of March 2022 to be conducted. Employer contributions would rise to 23.7 per cent and then 25.2 per cent.

However, employee contributions would need to revert to 9.8 per cent from April 2023 under the UCU’s proposal, “to secure current benefits or, if not possible, the best achievable as a result of the call on USS to issue a moderately prudent, evidence-based valuation”. The union says that employer contributions could remain as high as 25.2 per cent.

The union said that it understood that in the USS consultation on UUK’s reforms, a “significant majority” of scheme members voted in favour of increasing contributions to protect benefits, and it has called on the fund to publish the full results as soon as possible.

Jo Grady, the UCU general secretary, said she was tabling “serious proposals that would see both employers and employees pay slightly more to protect retirement benefits and allow for a new evidence-based valuation of the pension scheme to be conducted”.

“If employers are serious about stopping UK-wide strike action in February, they need to agree to seriously consider UCU’s proposals at the next meeting of negotiators. The university sector continues to show strong growth, and university bosses can afford to meet our proposals. If they refuse to do so, they are choosing to force staff to walk out,” Dr Grady said.

A UUK spokeswoman said the organisation would share the union proposal with its members but highlighted that the suggestion that universities should pay as much as 25.2 per cent contributions was “far beyond the mandate employers have given UUK” and argued that the suggested increase in member contributions would be “unaffordable for many staff”.

“The union’s proposal does not appear to be a serious attempt to reach agreement as it doesn’t reflect the views employers have expressed in consultations. Employers will also question why the proposal has arrived so late in the valuation cycle – especially since industrial action has already been taken,” said the spokeswoman, who added that UUK nonetheless looked forward “to a formal discussion through the joint negotiating committee about both the UCU and UUK proposals with the hope that an affordable solution can be found”.

Writing previously for Times Higher Education, Dame Kate Barker, chair of the USS’ trustees, said it was “incorrect and misleading” to claim that the 2020 valuation “rest[ed] on the market values of one day”. Stock market turmoil that year meant that assets were relatively cheap, allowing for greater returns; although the deficit is smaller now, assets are also more expensive.

Forty-four university union branches have a mandate for strike action over the USS, part of a wider dispute also covering pay and working conditions and involving 68 campuses in total.

chris.havergal@timeshighereducation.com

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